The intention is to achieve a neat division of a single holistic organizational objective into several micro objectives for each of the structural units. Goal setting serves to align the priorities of these structural sub-units.
However the greater the division and clarity in individual goals of sub-units the greater is the possibility that some of these objectives will be contradictory to each other. If these goals are set in isolation then a lot of time will be spent resolving conflicts between these goals. There is always the temptation to structure rigidly and to create watertight compartments with distinctive goals to bring clarity in goals and monitor their achievement but this is not possible without conflicts since no sub-unit can work completely independently of the other in an organization.
Conflict between such contradictory objectives will lead to conflict between these structural sub-units. A classic example occurred recently at Bajaj Auto Limited. Top management decided to raise the production of motorcycles to a very large number compared to what was being produced. The Sales and Marketing department communicated this objective to the workers. At the same time, the Human Resources department received a directive saying they were overstaffed so a VRS policy will have to be initiated. A substantial fraction of workers were asked to leave. The remaining workers subsequently had to work overtime to achieve the requisite targets. A union strike was proposed and the situation threatened to turn ugly. This illustrates the nadir that an organization can reach if it's component sub-units attempt to operate independent of each other.
In its simplest term, conflict is no more than a by - product of growth, change, or innovation. And as mentioned before, it is practically inevitable. But it's also something that, when handled correctly can actually promote better communication, guarantee achieving desired results, and improve employee morale and productivity.